Scope of the Bill and deadline for submissions
This week, the Local Government Water Services Bill (Bill) had its first reading in Parliament. This is the third and final piece of legislation in the Government's Local Water Done Well policy reform programme. This Bill follows the Local Government (Water Services Preliminary Arrangements) Act 2024 (Preliminary Arrangements Act), enacted in September, which provided transitional measures to reform water services delivery arrangements. The new Bill provides more fulsome, longer-term arrangements for water services delivery under a new regulatory framework. In particular, the Bill proposes:
- a new framework for water services delivery, including new models of delivery which councils may elect to use;
- the regulation of water services by the Commerce Commission via a new economic regulation and consumer protection regime to be inserted into the Commerce Act 1986 (Commerce Act);
- changes to the water quality regulatory framework and the Water Services Authority / Taumata Arowai; and
- various consequential amendments to a number of other pieces of legislation.
The Bill has been referred to the Finance and Expenditure Committee. Public submissions on the Bill are now open and will close on 23 February 2025. The Bill is expected to be enacted by mid-2025.
The Bill introduces a new regulatory framework for water services
Key aspects of the Bill are outlined below.
- Water services delivery models: The Bill outlines various models of water service delivery for councils to choose between to deliver water services, either jointly with other councils or own their own. This includes single or multi-council water organisations (i.e. council-controlled organisations), consumer trust or mixed ownership models, or any other alternative model proposed by the council. Councils can also elect to deliver some or all water services in-house.
- New reporting framework: The Bill provides for a new planning and accountability framework for water services providers, made up of three key documents: a Statement of Expectations, a Water Services Strategy, and annual reports.
- New economic regulation regime: The Bill would amend the Commerce Act to introduce a new economic regulation regime for water services. The new regime would empower the Commerce Commission with a range of regulatory tools, including the ability to set:
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- information disclosure requirements. Building on the Water Service Delivery Plans required by the Preliminary Arrangements Act, information disclosure would be the key regulatory tool initially, with requirements expected to be set within six months of the Bill's enactment;
- minimum and maximum revenue thresholds and ringfencing requirements;
- quality and / or performance standards and incentives; and
- price-quality regulation.
The Bill also provides for the establishment of a consumer protection regime that would equip the Commerce Commission with tools such as the ability to issue a mandatory service quality code.
The cost of regulation – who pays?
We note that the Commerce Commission's costs would be recoverable from regulated water service providers via a levy, commencing 1 July 2025 onwards. The Ministry of Business, Innovation and Employment (MBIE) is currently consulting on the proposed levy, with submissions due on 24 January 2025 (see Seeking feedback on a proposed levy to recover Commerce Commission costs of regulating water services | Ministry of Business, Innovation & Employment). The current proposal is for 100% of the Commission's costs to be funded by the sector (and the ability to pass through those costs to consumers).
Alongside MBIE, the Water Services Authority - Taumata Arowai (Authority) is also currently consulting on levy proposed in the Bill to fund its own costs of regulating water quality, with submissions also due on 24 January 2025 (see Consultation for levy for 2025 - 2028 | Taumata Arowai). The current proposal is for the majority of the costs to be funded by the sector with a small contribution from the Crown. Again, it is expected that water services providers will have the ability to pass through those costs to consumers.
The Bill contains other important operational matters
Other matters in the Bill that may be of interest include:
- Tax and charging: With the exception of Watercare, the Bill provides that income generated by water organisations would be tax exempt under the Income Tax Act 2007, and water services providers would have a statutory basis to assess, set and collect water services charges from consumers.
- Bylaws and enforcement powers: The Bill proposes a new framework for the making of water services bylaws and their enforcement, which would replace the existing framework in the Local Government Act 2002 (LGA 02).
- Land access: The Bill proposes to align the power to access land for water services works with the land access powers of other utility providers. Landowners and occupants would receive notice of planned works on their land and would be able to impose reasonable conditions of entry.
- Ministerial intervention: The Bill would extend some ministerial powers contained in the LGA 02 to apply to water service providers and water organisation shareholders. In particular, it would create the ability to appoint two new ministerial oversight bodies (a Crown facilitator and Crown commissioner) in the case of a problem. The definition of "problem" would also be extended to cover a broader range of scenarios applicable to water, such as noncompliance with new economic regulation.
- Standards: The Bill would enable the introduction of national standards for wastewater and stormwater through amendments to the Water Services Act 2021 and Resource Management Act 1991. This would ensure councils implement a single approach to resource consents (with room for exceptions). The Bill would also introduce a mechanism for the Water Services Authority to develop mandatory National Engineering Design Standards to help ensure consistency across water network infrastructure design and construction.
- Treaty of Waitangi: The Bill proposes to repeal references to the Treaty of Waitangi in the Water Services Act 2021 and Taumata Arowai – the Water Services Regulator Act 2020, replacing them with a general obligation to provide advice "from a Māori perspective". bligations on the Water Services Authority to "give effect to Te Mana o Te Wai" would also be repealed.
If you would like further information on any aspect of the above, please contact one of our experts below.